THE CABINET: Farley Surplus

When James Aloysius Farley, who had done well selling building materials, took over the Post Office Department last year he announced in his quiet way that he was going to show the nation how its “largest single business” should be run. Last July the Postmaster General radioed to President Roosevelt aboard the Houston a triumphant vindication of his boast: “I have the honor to inform you that pre-audited figures for the fiscal year ended June 30, 1934, show, after making the usual adjustments authorized by law for certain subventions and free mailing services, that our postal receipts exceeded expenditures for the first time since 1919, the surplus being approximately $5,000,000.”

Few days before, the Treasury had reported an estimated Post Office deficit of $52,000,000. Newspapers which had blazoned “General” Farley’s surplus announcement in front page headlines were soon pointing out the discrepancy in their editorial columns, explaining how the surplus had been arrived at by a bookkeeping trick. No one paid much attention.

Newspapers rushed once more for their headline type when, with his figures audited, the Postmaster General made a final report for fiscal 1934 to the President. Wrote he: “I am more than gratified to be able to inform you that these [figures]show a surplus of $12,161,415.03, after making the adjustments authorized by the act of June 9, 1930, for certain subventions and free mailing services.

“This surplus is the first one shown in the operations of the Post Office Department since 1919 and is greater than for any other fiscal year in the history of the postal service, with the exception of that for 1918.”

Jim Farley, it now appeared, was ready to be called “the greatest Postmaster General since Benjamin Franklin.” But last week Ashmun N. Brown, alert Washington correspondent for the Providence Journal, dug out of the Treasury report the old fact of the Post Office’s $52,000,000 deficit. Explanation of the Farley surplus, he showed, lay in the vague and inconspicuous phrase about “adjustments” for “certain subventions and free mailing services.” That covered Post Office expenditures of $64,000,000—the cost of ocean and air mail subsidies, the estimated cost of carrying free government mail. To create his surplus the Postmaster General had simply lifted this item off the debit side of his ledger.

This time Jim Farley’s numerous enemies set up a tremendous hullabaloo. The Republican Press burgeoned with sarcastic editorials charging him with deliberately deceiving the nation. Wrote Political Pundit Frank R. Kent in the Baltimore Sun: “In a normal administration no department head would have dared present such a report. He would have known it would be analyzed at once, the joker discovered and the pretense punctured. . . . The truth is Mr. Farley spent $52,000,000 more last year than he took in and his ‘surplus’ is obtained only by not charging as expenses some $64,000,000. . . . Having performed this unprecedented trick with the figures, Mr. Farley piously says in his report: ‘For the first time in 15 years the taxpayers of the country have been relieved of making good a postal deficit.’ ”

Fact was, Mr. Farley’s operation had been neither unprecedented nor unlawful. Hoover’s Postmaster General Walter Folger Brown first performed the bookkeeping trick in 1929, got Congress to validate it the following year.* But not even Congress can turn a bookkeeping trick into anything but a trick. No certified public accountant would ever have approved Jim Farley’s own company books if he had tried to balance them as he did the Post Office’s. No comfortable legal fiction could relieve U. S. taxpayers from making up the very real $52,000,000 which the Post Office last year spent in excess of its receipts. As for their Chief’s claim to the greatest surplus but one in postal history, even Post Office officials admitted that his budget could not be fairly compared to those before 1929.

*But even after deducting sums ranging from $29,000,000 in 1929 to $53,000,000, in 1932, “General” Brown still showed deficits of $56,000,000 to $152,000,000.